GST panel to review tax on large cars, leased vehicles

The GST Council, which meets on Saturday, will also discuss concerns over leased vehicles, given that the levy has been raised to 43% compared to 12.5-13% VAT earlier.Sidharatha Roy | TNN | August 05, 2017, 07:16 IST

In addition, the government is keen to push E-Way bills for easier movement of goods from October 1, although its use will be limited to GST.NEW DELHI: The Centre and states will review the tax structure on large cars as well as continuation of central sales tax (CST) on petrol and natural gas when they meet a month after goods and services tax (GST) was launched.

The GST Council, which meets on Saturday, will also discuss concerns over leased vehicles, given that the levy has been raised to 43% compared to 12.5-13% VAT earlier.

This has resulted into an increase of almost Rs 10,000 a month on a Toyota Altis where one year of the four-year lease has been completed. In addition, it will impact Ola drivers and travel agencies, which depend on leased cars.

“It is not yet clear if a decision will be possible because there are some complexities involved. But we will discuss the issues,” said a senior officer.

The GST Council had agreed to a 15% compensation cess on large vehicles, resulting into a situation where the price of SUVs fell, while hybrid vehicles became more expensive.

Now, states led by Tamil Nadu are seeking a review and the issue is scheduled to be taken up on Saturday, sources told TOI. Karnataka too had raised concerns over the levy on hybrid vehicles, which were dismissed by the Centre earlier.

When the rate was fixed, some of the states had flagged their concerns over the current regime, which resulted into a 43% levy including cess. Some states are also demanding that GST Council should increase levy on top-end luxury vehicles and SUVs.

In addition, several states are flagging concerns over taxation of handicrafts and handloom, arguing that 18% on several items is too high and is impacting livelihood of workers.

From Gujarat, Rajasthan and Uttar Pradesh to Odisha, most states have concerns over handlooms, which face the same levy as textiles. In any case, textiles is proving to be a major area of concern for states, with traders protesting over the imposition of tax.

A big sticking point is proving to be CST on petrol and natural gas, something that the states are not keen on. “It is resulting into a situation where people are going to neighbouring states, something that all of us wanted to avoid after GST,” said a state government official.

The central government is backing CST, although it recognises that there are problems associated with it. Gujarat is among a handful of states, who are seeking continuation of the levy as it earns around Rs 7,000 crore through the tax on natural gas. The Centre has argued that withdrawal of levy will lead to an increase in price of fertilisers. But states are countering this by saying that the Centre can reduce the levy on the farm input. “The Centre wants everyone else to take a hit but is not willing to give up even a penny,” a state government source said.

In addition, the government is keen to push E-Way bills for easier movement of goods from October 1, although its use will be limited to GST.

In fact, segment leaders like Maruti Suzuki, Tata Motors and Hero MotoCorp have reported de-growth of 34.3 per cent, 45 per cent and 20 per cent, respectively giving a clear indication of a prolonged slowdown in the sector.